Some Worldcom 401(k)s Ailing

Employees of WorldCom Inc. who own shares in the telecommunications company in their retirement plans collectively have lost at least $1.1 billion during the past three years.

That makes them no different from the company's other investors, who have seen the stock's value slide from its mid-1999 peak of $64.50. Unlike employees of Enron Corp., the WorldCom workers were not forced to buy the stock or to hold it as it fell. But the plight of the WorldCom employees is the latest warning of the risks of tying up too much of one's future in an employer's stock.

WorldCom's stock had been trading below $2 a share before the company revealed that it improperly booked $3.9 billion in expenses two weeks ago. Earlier this week, the stock closed at 21 cents.

About 32 percent, or $642.3 million, of WorldCom employees' retirement funds were held in company stock at the end of 2000, when WorldCom last filed its retirement benefit information with the Department of Labor and the Internal Revenue Service. Those investments now make up less than 4 percent of the total assets in WorldCom's 401(k) portfolio, and they are now valued at less than $18.7 million, said spokesman Brad Burns. In 1999, the value of the company stock in that portfolio was at least $1.19 billion, according to documents from the Securities and Exchange Commission.

Former WorldCom employee Lisa Brown, 35, says she heeded the encouragement of former chief executive Bernard J. Ebbers and invested all of her retirement contributions in company stock. She said the value of her 401(k) account fell from $45,000 to $210.

Brown, who worked for a decade as a telemarketer for MCI Communications Corp. (now part of WorldCom), has joined several other employees in filing class-action suits against the company and its directors in an attempt to recover some of their investments.

FOR THE RECORD - CORRECTION PUBLISHED FRIDAY, JULY 12, 2002.A Washington Post article that appeared on Page 2D of Thursday's edition inaccurately suggested that Enron Corp. employees were forced to purchase company stock. Enron employees who participated in the company's 401(k) savings plan received contributions to their retirement funds in Enron stock.

"I lost 10 years of investments, and so financially I am 10 years behind where I should have been," said Brown, who now works for a nonprofit agency near Wichita, Kan. "I might have to work to supplement my income after I retire."

WorldCom, which acquired more than 70 companies within 15 years, had different types of retirement benefits that were rolled into a single plan in 2000, according to SEC filings.

WorldCom's standard investment plan allows full-time employees to set aside up to 5 percent of income in a retirement account. WorldCom matched up to 4 percent of that contribution in either WorldCom stock or cash that could be invested in other mutual funds, depending on what the employee chose, according to the filing.

Additionally, employees of MCI, which WorldCom purchased in 1998 for $40 billion, could purchase MCI stock at a 15 percent discount.

Investment experts said WorldCom's investment policy is not unusual. It is also not as restrictive as the policies of Enron, the bankrupt energy-trading firm that had 60 percent of its employees' retirement assets in company stock. Enron matched its employees' contributions in Enron stock that could not be sold until after the age of 50, thus forcing its employees to hold onto a substantial amount of stock, even as the price fell. WorldCom employees, on the other hand, can withdraw funds from their plans before the age of 59 if they could prove financial hardship, according to filings.

"The WorldCom 401(k) stock plan never prevented employees from buying or selling stock; participation has always been optional," said Julie Moore, a spokeswoman for WorldCom.